NOTICE PAY RECOVERY

5481 views 3 replies

Nitin Garg

Service

24 Points Posted on 23 December 2009

Hi,

I have searched a lot on my query but this is still confusing, Please help me to know if there is some provision in income tax for this.

Query 1

Employee working in a company leaves the Job from Company without giving the Notice. So the Company deducts the Notice Payment at the the time of full & final Settlement of the employee.
Whether Employee would be able to take deduction of Notice payment from his Salary Income. If not then can an employee deduct this amount from his earnings in that organisation while filing tax return.

Query 2

The Second Company Reimburses to the Employee the Notice Pay Paid by the employee to the previous company. Whether the recovery of Notice Pay made my employee from the current Employer would be considered for taxation for computation of Income of Employee.

I feel I alreay know the answer of my 2nd query "Yes" but I am ony putting this query because there will be a double tax on the same amount.

Secondly employee earnings will be increased unnecessay & he will be in higher tax bracket due to this amount.

Kindly quote with relevant Text, judgement or Notification if available

Replies (3)

Sunil Liladhar Kotak

Manager (F & A)

2025 Points Posted on 24 December 2009

Dear,

In query 1 I feel that the deduction will be allowed & in the second case the Reimbursement shall be taxable.

would be happy to learn from other views

Sunil

Amir

Learner

4016 Points Posted on 24 December 2009

Hi Nitin,

As far as my understanding goes Sec 15 (Charging Section of Salary) says that "Salary is taxable on due or received whichever is earlier basis" and the AMOUNT WHICH CAN BE DEDUCTED from the salary are either listed in Sec 10 or Sec 16..

Apart from Sec 10& 16 (and rules made thereunder) No deduction from salary can be claimed..

Hence, recovery of Notice Pay by the Employer will not going to reduce your Tax Liability. (NO DEDUCTION, NOTHING)

As far as reimbursement of Notice Pay by new employer is concerned "The amount WILL BE TAXABLE as SALARY" Since THE DEFINATION OF SALARY includes "ANY BENEFIT RECEIVED FROM THE EMPLOYER"

AND MY FRIEND IT IS NOT DOUBLE TAXATION OF SAME AMOUNT, I THINK YOU ARE MIXING BOTH THE EVENTS...THEIR ARE TWO DIFFERENT EVENTS ONE IS "RECOVERY BY PREVIOUS EMPLOYER" (THE BENEFIT OF WHICH CANNOT BE CLAIMED IN THE ABSENCE OF SPECIFIC PROVISION TO THAT AFFECT) AND THE OTHER IS "REIMBURSEMENT BY NEW EMPLOYER"(WHICH IS TAXABLE BECAUSE OF THE WIDE DEFINATION OF SALARY).